JUDGMENT OF 26.1.1978 — JOINED CASES 44 TO 51/77 UNION MALT v COMMISSION

In Joined Cases 44 to 51/77

THE COURT composed of: H. Kutscher, President, M. Sørensen and G. Bosco (Presidents of Chambers), A. M. Donner, P. Pescatore, Lord Mackenzie Stuart and A. O'Keeffe, Judges, Advocate General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

I — Facts and written procedure

II — Conclusions of the parties

III — Submissions and arguments of the parties

IV — Oral procedure

Decision

Costs

I —. Facts and written procedure

1. Malt obtained from barley (tariff heading 11.07 A II (b) of the Common Customs Tariff), an agricultural product derived from barley (processing coefficient 1.33), is subject to the common organization of the market in cereals set up by Regulation No 120/67 of the Council of 13 June 1967 (OJ, English Special Edition 1967, p. 33), replaced since 1 November 1967 by Regulation No 2727/75 of the Council of 29 October 1975 (OJ 1975, L 281, p. 1).

2. Within the context of that system the Community rules also provided that in respect of certain products, including malt and barley, the refunds could be paid in advance, subject to certain conditions, before the product actually leaves the geographical territory of the Community and, in the case of processed products, even before processing takes place. To that end, Regulation No 441/69 of the Council of 4 March 1969 (OJ, English Special Edition 1969 (I), p. 91), set up (in Articles 2 and 3) two systems for advance payment, by providing for the product to be placed under the bonded warehouse procedure for the export of unprocessed goods or under the procedure for processing products under customs control. The detailed rules for the implementation of those systems are laid down by Regulation No 1957/69 of the Commission of 30 September 1969 (OJ, English Special Edition 1969 (II), p. 417).

3. By means of Regulation No 413/76 of 25 February 1976 (OJ 1976, L 50, p. 18) the Commission made certain modifications to the aforementioned procedure. In particular, it reduced the period during which certain cereal products, — inter alia the products in dispute — may remain under the aforementioned customs procedure which provides for the refunds to be paid in advance.

4. The applicant undertakings are variously involved in the production, storage, preservation and processing of malt and in trade in that product.

5. By order of 13 May 1977 the Court decided in pursuance of Article 43 of the Rules of Procedure to join the present cases for the purposes of the procedure and judgment.

II —. Conclusions of the parties

—. Declare its application based on the extra-contractual liability of the Commission admissible and well founded and, in allowing it;

—. Order the Commission of the European Communities to pay to it by way of damages the sum of FF… subject to increase in the course of the proceedings with interest on that sum at the discount rate of the Banque de France as from the date on which the present application was lodged;

—. Order it to pay all the costs.

(1). Dismiss the application brought by the applicants as unfounded;

(2). Order the applicants to pay the costs.

III —. Submissions and arguments of the parties

1. The amount for which the licences were taken out was almost double the amount of malt exported during the preceding marketing years;

2. A detailed investigation suggests that the licences at issue were taken out without contracts of sale having been concluded for the quantities of malt in question, as is assumed in principle by the advance-fixing system. According to the information supplied to the Commission most of the offers for malt are made to the breweries only when it is possible for the parties concerned to have a clear idea how prices for the annual harvest are settling. As regards barley this can hardly be until after the first fortnight of July. Since three or four weeks normally elapse between the date on which the offer is made and the final conclusion of the contract most of the firm contracts for the new marketing year cannot be signed before 1 August;

3. A comparison of the date on which the export licences were applied for and obtained and the date of conclusion of the contracts shows that the latter took place so much later that the advance fixing of the refund was normally unable to cover the contracts already in existence;

4. Recent experience has shown that the largest number of licences was taken out when the refund had reached its maximum level. Thus, for example, they were taken out during May and June although the prices were not clearly established and it was not yet possible for the delivery contracts for the new marketing year to be concluded.

(a). As regards the alleged violation of the principle that laws shall not he retroactive in effect, it is clear from Article 3 that Regulation No 413/76 is not retroactive in its effect. The provisions only apply to situations which arose after its entry into force. The previous rules contained in Regulations Nos 441/69 and 1957/69 continued to apply to the consequences of situations existing earlier (products brought before 5 March 1976 within the system for advance payment of refunds).

(b). As regards the principle of respect for established rights the applicants' argument is based on confusion as to the true scope of the two groups of rules in question: those relating to the advance fixing of export refunds (Article 16 (4) of Regulation No 120/67) and those relating to the systems for the advance payment of refunds (Regulations Nos 441/69 and 1957/69).

(c). Finally, as regards the question of respect for legitimate expectation, the arguments which the applicants put forward to support their position are far from proving that in this instance a legitimate expectation existed or that the Commission wrongfully disregarded it.

IV —. Oral procedure

1. The present applications, which are brought under the second paragraph of Article 215 of the EEC Treaty, seek an order that the Commission of the European Communities pay damages to the applicants to compensate for the loss which they claim to have suffered as a result of Commission Regulation No 413/76 of 25 February 1976 (Official Journal 1976, L 50, p. 18), which entered into force on 4 March 1976, amending Regulation No 1957/69 of the Commission of 30 September 1969 (Official Journal, English Special Edition 1969 (II), p. 417) concerning the periods during which cereal products such as malt and barley may remain under the bonded warehouse procedures for unprocessed goods and for the processing of goods under customs control brought in by Regulation No 441/69 of the Council of 4 March 1969 (Official Journal, English Special Edition 1969 (I), p. 91).

2. It is established that the products in question are subject to the common organization of the agricultural markets set up by Regulation No 120/67 of the Council, replaced since 1 November 1975 by Regulation No 2727/75 of the Council of 29 October 1975 (Official Journal 1975, L 281, p. 1).

3. As regards trade with third countries, Article 12 of the latter regulation provides that exports from the Community of the products in question shall be subject to the submission of an export licence which, as regards malt, is valid for a period of 11 months from the month following that in which it is issued.

4. In addition, Article 16 (1) of the regulation provides that in order to enable those products to be exported out of the Community the difference between the prices on the Community market and the quotations or prices on the world market may be covered by a refund.

5. Paragraph 4 of the same article provides for the possibility of fixing the refund in advance by stipulating that the refund applicable on the day on which application for the licence is lodged may be applied to an export to be effected during the period of validity of the licence.

6. The Community rules also provide that for certain products, including malt and barley, the refund thus fixed in advance may be paid to Community exporters before the product actually leaves the geographical territory of the Community or, in the case of processed products, even before they are processed.

7. To that end Regulation No 441/69 of the Council provided for the exporter to place the product under customs control before the validity of the export licence expired.

8. It therefore laid down in Articles 2 and 3 two procedures for bringing the product under customs control, first, the procedure for processing the goods under customs control, which applies to basic products intended for export after processing, and, secondly, the bonded warehouse or free zone procedure for products intended for export unprocessed.

9. Regulation No 1957/69 of the Commission, which lays down the detailed rules for the implementation of the aforementioned Regulation No 441/69, fixed at six months the period during which the products or goods could remain under the bonded warehouse or free zone procedure.

10. As regards the procedure for processing the goods under customs control, that regulation limited the period during which the goods might remain in the warehouse, as regards products subject to an export licence, to the remainder of the period of validity of that licence at the date on which the basic products came under customs control or, if that period is less than three months, to three months.

11. As regards the bonded warehouse procedure for both unprocessed goods and for processing under customs control, Regulation No 413/76 of 25 February 1976, which entered into force on 4 March 1976, reduced those periods by limiting them, as regards certain cereal products such as those at issue, to the period of validity of the export licence which is outstanding on the date on which the products become subject to the customs control, or to one month if the said period is less than one month.

12. The applicants maintain that by reason of several factors of a technical and economic nature connected with the particular features of the market in barley the contractual undertakings entered into by the malt-producing undertakings generally last for 15 to 18 months, for deliveries to be carried out within a period of 12 months.

13. They maintain that the bonded warehouse procedures for unprocessed goods and for processing under customs control, in the form in which they were organized before the entry into force of Regulation No 413/76, enabled the four to six months which generally passed between the placing of the order and the beginning of deliveries to be recouped when the validity of the export licence expired.

14. By reducing to one month the periods by which the period of validity of the export licence could be overrun, without providing for any transitional measure for undertakings finally entered into and in the course of performance when it entered into force, that regulation amended retroactively and in an unforeseeable manner the financial stipulations on the basis of which the undertakings were entered into and thus caused the applicants a loss for which compensation is due.

15. Following the adoption of the amendment the applicants found it impossible to perform fully the aforementioned contracts of sale, thus going back on the decisions adopted with regard to their customers and risking the loss of the securities relating to the unused export licences.

16. In order to avoid that consequence they had either, by carrying out the terms of the contracts, to suffer losses on the difference between the refunds and compensatory amounts applicable or, by attempting to obtain an appropriate modification of certain contracts, to bear considerable expense, such as the costs of storage and of warehousing the goods.

17. The applicants conclude that by adopting Regulation No 413/76 the Commission violated the principles of respect for established rights and for the legitimate expectation of traders as well as the principle that laws shall not be retroactive and thereby flagrantly violated a superior rule of law for the protection of the individual.

18. Such a violation represents in a concrete form a wrongful act of such a nature as to impose a liability on the Community towards the parties concerned.

19. It is first necessary to distinguish the rules relating to the export licences involving advance fixing of the refunds from those relating to the advance payment of the refund fixed in advance, which are covered by Regulation No 413/76.

20. The aim of the rules relating to the advance fixing of the refunds is to enable Community exporters to be certain of the amount of the refund for which they may qualify when the exports under consideration take place, in so far as they are actually carried out before the expiry of the period of validity of the licence.

21. As is shown, in particular, by the second, third and fifth recitals, the system for advance payment of refunds set up by Regulation No 441/69 seeks to ensure, both as regards Community basic products intended for export to third countries after processing and for Community products intended for export unprocessed, equality of treatment with products originating in third countries and allowed to benefit from the inward processing arrangements and from the bonded warehouse or free zone procedures.

22. The grant of such a benefit is not a necessary element of the scheme for the advance fixing of the refunds, since the two groups of rules in question, those dealing with the advance fixing of the refunds and those covering their advance payment, pursue separate aims and cannot be assimilated to one another.

23. Having regard to that distinction, although the holder of an export licence fixing the refund in advance has an established right to receive the refund fixed in advance when the export is carried out, in so far as it actually takes place under the conditions laid down by the Community rules, he cannot acquire from the issue of that licence a right to have the system for advance payment of the refund applied to him in accordance with the rules in force on the day of issue of the licence.

24. In particular, the special objectives of the system for advance payment of refunds and the reason for its existence cannot justify its being used as if its principal aim were to overrun the period of validity of the export licences.

25. The period of validity of those licences is fixed in the context of the relevant rules and may only be amended under the conditions provided for therein, without regard for the rules relating to the advance payment of refunds.

26. It results, in fact, from Annex II to Regulation No 2042/75 of the Commission of 25 July 1975 (Official Journal 1975, L 213, p. 5), which provides that the export licence for malt shall be valid until the end of the eleventh month following its date of issue, even though the period of validity for the other products listed is shorter, that the appropriate place for the special considerations inherent in the particular features of the trade in each product is in the rules relating to the export licences and that those considerations cannot be invoked within the context of the system for advance payment of refunds in order to overrun the period of validity of the export licences fixed by the rules relating thereto.

27. It follows from the foregoing considerations that the complaint relating to violation of established rights put forward by the applicants in relation to the amendment made by Regulation No 314/76 to Regulation No 1957/69 cannot be upheld.

28. In addition, the system introduced by Regulation No 441/69 must be applied in such a way as to prevent, in particular in the case of export licences valid for a long period, the opportunity offered to the exporter but the system from resulting in an excessive advantage, having regard to the need to ensure a balance between Community products and products originating in third countries, and from leading to serious difficulties in trade with third countries.

29. To that end Article 5 of the aforementioned Regulation No 1957/69 provides that In order to prevent difficulties arising on markets on account of the characteristics of the products or goods the periods during which the goods may remain under one of the customs control procedures may be reduced, for a limited or unlimited period as circumstances require, in accordance with the procedure laid down in Article 26 of Regulation No 120/67/EEC or in the corresponding articles of the other regulations on the common organization of the markets.

30. Even before the adoption of Regulation No 413/76 the Commission made use of that provision in the milk sector in Regulation No 2182/69 of 31 October 1969(Journal Officiel 1969, No L 276, p. 50) in order to avoid difficulties in international trade and in Regulation No 588/71 of 19 March 1971 (Official Journal, English Special Edition (I), p. 132), under the terms of which it was necessary to reduce the periods during which the products could remain under customs control to match the period of validity of export licences.

31. It is established that since 1972/1973 the number of export licences taken out for malt with advance fixing of the refund had increased considerably each year and that that increase created difficulties in the market or in the international trade in the products in question as a result of the considerable variations in the level of the refund applicable at the same period.

32. As a result of those factors the maintenance in force of the periods during which the products could remain under customs control provided for by Regulation No 1957/69 proved to be no longer compatible with conditions in the malt market.

33. The crisis caused on the same market by the massive purchases by a third country in July 1975 could only increase the difficulties and render it henceforth impossible for the Commission to postpone action to modify the conditions of application of the aforementioned system.

34. The trade circles concerned could not, therefore, be unaware when they negotiated and entered into their undertakings for the year 1975/1976 that in the light of the particular development which had taken place in the malt market since 1972/1973 the maintenance in force of the system for advance payment of the refund, applied in accordance with the time-limit laid down by Regulation No 1957/69, gave rise to very serious difficulties as regards trade with third countries and an increasingly heavy financial burden for the Community.

35. Those circumstances should have made the applicants aware of the possibility that in the light of the conditions on the malt market the Commission might be led during the 1975/1976 cereal year to make use, as regards that product, of the possibility offered by Article 5 of Regulation No 1957/69 of reducing the periods during which the goods may remain under customs control, in order to re-establish a balance between the advance-fixing procedure and the system for advance payment of refunds, in accordance with the state of the market.

36. In fact, on 5 February 1976, the Commission, which considered that it should not interfere with the advance-fixing procedure, presented the Management Committee for cereals provided for in Article 25 of Regulation 2727/75 of the Council with the alternative of reducing either the periods during which the goods remain in the warehouse or the periods of validity of the export licences.

37. In those circumstances the reduction in the periods under customs control adopted by Regulation No 413/76 does not appear to be so unforeseeable as to have adversely affected the legitimate expectation of the traders concerned.

38. Moreover, the Commission cannot be criticized for having failed, when adopting Regulation No 413/76, to provide for transitional measures in favour of the goods for which export licences had been obtained but which were not yet placed under one of the bonded warehouse procedures.

39. According to the first paragraph of Article 3 of the regulation, it entered into force on the seventh day following its publication in the Official Journal of the European Communities.

40. In the particular circumstances to provide for a longer period for its entry into force would have left the regulation without any practical effect.

41. Finally, the second paragraph of Article 3 of the regulation provides that it shall not apply to products which, before its entry into force, were placed under one of the systems for advance payment of refunds instituted by Regulation (EEC) No 441/69.

42. By that provision the regulation allows goods brought before its entry into force under the bonded warehouse procedures for unprocessed goods or for processing under customs control to continue to benefit from the periods under customs control provided for by Regulation No 1957/69 and is therefore not retroactive in effect.

43. On those grounds it does not appear that when it adopted Regulation No 413/76 the Commission acted in flagrant violation of a superior rule of law for the protection of the individual and thereby imposed a liability of the Community towards the applicants.

44. The applications are therefore dismissed as unfounded.

45. Under the terms of Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

46. As the applicants have been unsuccessful in their action they must be ordered to pay the costs.

On those grounds, THE COURT hereby:

1 Dismisses the applications as unfounded;

2 Orders the applicants to pay the costs.